Correlation Between Ecolab and United States

Can any of the company-specific risk be diversified away by investing in both Ecolab and United States at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ecolab and United States into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ecolab Inc and United States Steel, you can compare the effects of market volatilities on Ecolab and United States and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ecolab with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ecolab and United States.

Diversification Opportunities for Ecolab and United States

-0.34

Correlation Coefficient

Ecolab  United States

Very good diversification

The 3 months correlation between Ecolab and United is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ecolab Inc and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel and Ecolab is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ecolab Inc are associated (or correlated) with United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Ecolab i.e., Ecolab and United States go up and down completely randomly.

Pair Corralation between Ecolab and United States

Assuming the 90 days trading horizon Ecolab Inc is expected to generate 0.01 times more return on investment than United States. However, Ecolab Inc is 91.98 times less risky than United States. It trades about 0.13 of its potential returns per unit of risk. United States Steel is currently generating about -0.02 per unit of risk. If you would invest  493,137  in Ecolab Inc on September 30, 2024 and sell it today you would earn a total of  1,316  from holding Ecolab Inc or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Ecolab Inc  vs.  United States Steel

Ecolab Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ecolab Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Ecolab is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, United States is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ecolab and United States

The main advantage of trading using opposite Ecolab and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ecolab position performs unexpectedly, United States can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in United States will offset losses from the drop in United States' long position.

The idea behind Ecolab Inc and United States Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.